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Published on Wednesday, September 21, 2016

Honest Selling Out?

[HMM]

Honest Selling Out?
Honest Company, the brainchild of actress Jessica Alba known for its organic baby and lifestyle products, is in talks to be bought out by a large consumer product corporation.  But if Honest gets bought out by the likes of Walmart or Proctor and Gamble (P&G), will it remain Honest? 

The potential sale
In February, it was reported that Honest executives were taking meetings with Goldman Sachs and Morgan Stanley to discuss a potential public offering.  Chris Thorne, Honest Company’s Chief Marketing Officer, dismissed rumours of a sale in the Spring.  He said that Honest always meets with banks and advisors to stay knowledgeable on business trends and their competition.

Recently, more talk has been heard that Honest is looking to be acquired by a larger packaged goods outfitter instead of a public offering.  Names like Proctor and Gamble or Unilever have been thrown around.  And this time, no one is dismissing the talk as just rumours.  

The power of e-commerce businesses
Honest Company would not be the first successful e-commerce venture to be scooped up by a larger brick and mortar retailer.  In fact, acquiring e-commerce businesses has recently become a hot trend among big corporations looking to reach a younger demographic and capitalize on growing revenue.

Earlier this year, Walmart acquired Jet, an Amazon rival that has only been around for a year, for $3.3 billion.  Following suit, Unilever purchased Dollar Shave Club in July for $1 billion.  And L’Oreal spent $1.2 billion to acquire IT Cosmetics, an eight year old cosmetics company out of Jersey City that sells over 300 skin and makeup products online.  

Honest Company - the dollars & cents
Currently, Jessica Alba’s Honest is worth $1.7 billion.  Last year alone they raised over $100 million in financing bringing their financing total to $222 million thanks to generous investors.  In 2015, Honest generated $300 million in revenue.

The majority of Honest Company’s profits come from their direct consumer sales on their websites Honest and Honest Beauty.  About 60% of their profit is made online.  A large portion of this is sales from their monthly subscriptions, which some customers have argued are difficult to cancel or purchased without knowing they were on-going subscriptions.  

The remaining 40% of their revenue comes from their wholesale selling, a sector that has seen increased growth in recent years.  Honest products are available in over 6000 stores including Target, Costco and Whole Foods. Honest also hosted a pop up shop in LA’s popular shopping district, The Grove, this summer. 

But are they that honest?
Honest, which prides itself on its safe and efficient products, has recently come under fire by consumers saying that isn’t quite so.  

The first of three lawsuits facing Honest concerns their laundry detergent.  The claimants allege that Honest’s laundry detergent contains Sodium Lauryl Sulfate (SLS), a harmful ingredient Honest has sworn to stay away from. Honest counters that they only use Sodium Coco Sulfate (SCS) in their detergents.  However, many scientists believe a large amount of SLS can be found in SCS.

In their next legal misadventure, Organic Consumers Association is claiming that Honest’s Organic Infant Formula actually contains 11 synthetic ingredients.  And lastly, a third lawsuit has emerged challenging the effectiveness of Honest’s sunscreen.

In response to the legal drama, Chris Thorne explains that Honest Company takes customer service very seriously.  However, he acknowledges that the use of Jessica Alba’s name and face can bring unwanted attention to their company.  They often find themselves in discussions with consumer advocacy groups looking to share their spotlight. 

Jessica Alba has called the recent lawsuits against Honest, “baseless.”  She understands that she and her company are easy targets and that the lawsuits are a great way to get a headline.  But at the end of the day, Alba stands by her ingredients and their effectiveness. 

History of Honest

Honest was launched in 2011 by co-founders Jessica Alba and Christopher Gavigan.  Gavigan now works as the company’s Chief Product Officer and has spent his career devoted to helping families nurture happy and healthy children.  Alba was a new mom and on the search for a product she could trust to use with her children.  So in 2011, the company began selling non-toxic environmentally friendly diapers and other baby products.  

Since then, Honest has exploded and now sells a variety of products outside of diapers such as personal care products, cleaning products, vitamins, gear and their popular subscription boxes.  Honest launched a secondary company, Honest Beauty, to sell their skin, makeup and hair products that are safe and environmentally friendly.  Honest Beauty plans to launch into nail products next. 

Honest is a company that prides itself on sustainable, effective and safe products, excellent customer service, beautiful packaging, social responsibility and, above all, an integrity in how it deals with its customers, stakeholders and employees - the honesty factor.  Let’s hope they don’t lose that no matter what their financial future holds.  

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Author: Ccarrell

Categories: Blogs, Consumer Products, Baby

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